When come to selecting a business typethere are certain facts to be considered.
In the given question, it clearly askopinion about limited company and partnership Limited company is a legal entity which is separatedfrom its owners and have an interminable existence, owned by shareholders andraising capital by issuing shares. Partnership is an association of two ormore people who have common goals to attain profits. In order to provide recommendations,strength and weakness of Partnership and Limited Company should be analysed. 1.1 Strength& Weaknesses of a Limited Company Strengths Legal personality – Limited Company has the advantage of legal personality where it can show in front of law as its own company name, Company and owners are treated as separated entities .This will admitted to enter company to acquire assets, contracts using the company’s name.
Responsibility for business debts – Limited company has the advantage of limited liability for the company. Shareholders are not personally liable to company debts. Interminable Existence – Limited company has a feature of interminable existence. Death of a member or bankruptcy doesn’t have any effect. Raise more capital – when companies issue higher number of shares, higher capital growth can be achieved. Tax Flexibility –Limited companies has a great advantage in tax calculation since it is more flexible compared with limited companies.
Weaknesses Unable to raise capital – Limited companies are unable to raise capital in the introductionary stage due to low financial strength. Higher legal requirements – Company structure bound with complicated legal requirements which make hard to conduct business operations. Profits & ownership – all the shareholders share profits and ownership Complicated Accounts- Company need to spend more money in accounting which required professionals. 1.2 Strengths & Weaknesses of Partnership Strengths Easy to start – this is one of the main advantage in partnership. low regulations makes easier to start the business. Variety of different skills and knowledge –New mind set of partners who have different abilities and experiences can be utilized Shared Responsibility –sharing nature of losses and liability becomes an advantage for partners. More Capital –More capital can be generated by involving more partners investing in the company lead to business growth.
Weaknesses Instable existence- A partnership can be terminated due to any serious matter happen to partners Unlimited liability –compared with limited companies Partnership business have an unlimited liability in the business. No legal personality –Partnership do not have legal personality, partners have to use their own personal names instead of the company’s name. Shared Profit – Partners have to share the profit according to the profit sharing ratio. Dispute among partners –When expanding business for different reasons, more partners involved with different opinions tend to increase disagreements. 2.
FinalRecommendation My recommendation for Fernando & Pererais to start the restaurant as a partnership, taking easy to commence advantagegain more capital and expand it slowly as a Limited company where the company canenjoy legal personality, interminable existence and limited liability. 1. Distinctionbetween Financial accounting & Management accounting Financial accounting is the type ofaccounting which provide financial details of monetary transactions happenedduring the period of a business according to the accounting standards and principles.
It includes income statements, statement of financial position, cash flows etc.Management accounting is prepared to provide information to managers to evaluateand manage day to day operations of the entity including monetary and non-monetary transaction. The main objective of financial accountingis to provide useful information to itsstakeholders such as Mangers, suppliers, customers government etc. it is a compulsory document prepared annually,whereas management accounting is prepared forinternal use especiallyfor managers to take decisions regarding optimizing use of resources, imposingnew strategies, managing business activity. This document is not compulsory and is not prepared annual basis.